Costco is another firm that has decided to figure out how to move its imports without help from the ocean shipping alliances. It is working with Pasha Hawaii to charter box ships. according to the article, Costco is now in a position to move 20% of imports using its own fleet.
That will give Costco a lot more freedom to choose routes and drop-off points. Perhaps they can choose landings where congestion is lower, or where they can get guaranteed times for drop-off.
It will be interesting to see what they do about containers. But it’s easy to buy containers made in China for the export trade. And it’s almost cheaper than returning the empties to China and the Far East.
Why are people choosing New York/New Jersey to import containers?
One concern is the congestion and delay, averaging 18 days according to the article, at the West Coast ports of Los Angeles and Long Beach. Apparently throughput has reached a max there, and is unlikely to improve much.
Actually, ‘approaches’ is a good word. New York’s throughput is still below Los Angeles, by 411,000 to 417,000. But the trend in LA is down, markedly, and the trend in NY is up, so maybe a switch will happen soon. LA doesn’t have many short-term options for improving throughput.
Another concern of shippers is the possibility of labor actions on the West Coast. Historically, longshoreman unions and port terminal representatives have been confrontational on the West Coast. Since the ports are biggest, strikes there or slowdowns would have a serious effect on commerce. and that’s the point of strikes and slowdowns– to bring maximum pressure on the port and terminal representatives to make concessions. It is likely that there will be some kerfuffle. But it’s not clear that anyone wants a total stoppage or serious constriction of traffic. And it’s a major political nightmare too. Presidents in the past have declared states of emergency to keep people at work and the cargo moving. So I think something will be worked out.
When will New York/New Jersey reach its congestion threshhold, and ships start backing up?
It could be good news that the flush of demand for imports may be abating a bit as shippers think through how to realign their supply needs to reduce the pressure on their supply chains. More regular and predictable supply may be the outcome.
In December, Drewry published on their blog this article describing four significant disruptions likely to happen to shipping in 2022.
I feel these are right on target for the business, and will affect international shippers of all sizes, and intermediaries, such as brokers and freight forwarders.
I’m especially concerned with disruption in the resale of blocks of container space. Drewry’s discussion of MQCs (Minimum Quantity Commitments) indicates that contracts being tried out will require the MQC to be evenly spread across the year. This will be very hard for most forwarders to meet. While some of the business is of the level-quantity, just-in-time sort, lots of other shippers have seasonal blips in their demand. Those seasonal demands cannot be supported by regular fixed-quantity shipments; inventory costs would balloon, jeopardizing the business.
I’m using the word ‘seasonal’ in a time-series sense, not a climate sense; there is a lot of business that experiences ups and downs in demand, not related to weather, but to the needs of their customers. Clothing retail offers an example; summer wardrobes need to be brought in in early spring; winter clothes in late summer. Christmas tree lights and trees themselves are only needed in September-October to be ready for the Thanksgiving to Christmas buying period.
Smaller brokers and forwarders usually exist because they can provide special services to smaller shippers. They need to get access to space in order to help these shippers. Having to purchase on the spot market exclusively will mean that many small shippers will be handicapped.
But we cannot expect the brokers and forwarders to provide inventory consolidation services for the shippers who have these seasonal needs.
I recommend reading the brief article provided.
Drewry – Browse Recent Opinion Articles – New disruptions to supply chains in 2022 and how international shippers can respond
Supply Chain and Logistics 